California Homeowners Sue Insurers for Coordinated Denial of Fire Risk Coverage

California homeowners have filed a lawsuit against multiple major insurance companies alleging illegal coordination to deny coverage in fire-prone areas.

The complaint claims these insurers collaborated in a group boycott to push high-risk homeowners into the California FAIR Plan, the state's insurer of last resort, which offers more limited coverage at higher premiums. Key insurers named include State Farm, Farmers, Berkshire Hathaway, Allstate, and Liberty Mutual, which also jointly own and operate the FAIR Plan.

The FAIR Plan was established to provide basic insurance for those unable to obtain private policies but has come under scrutiny for its structure that potentially limits insurer liability while placing a greater financial burden on policyholders.

The lawsuit argues that insurers used the FAIR Plan as a device to force homeowners out of the private market, effectively controlling risk exposure and eliminating competition. This case highlights broader challenges in the U.S. property insurance market, where risk assessment and coverage availability are increasingly impacted by natural disasters and climate-related threats, making it difficult for homeowners in high-risk zones to secure adequate insurance.

The plaintiffs are seeking a jury trial and triple damages. This litigation emerges amid a national struggle with insurance availability and affordability in disaster-prone regions and growing regulatory scrutiny of last-resort insurance mechanisms like the FAIR Plan.